Tariffs are back in play. On April 9, US President Donald Trump announced plans to slap new tariffs on pharmaceuticals, urging drugmakers to shift production back to US soil. The rationale? The size of the US market justifies manufacturing at home. The subtext was even clearer: geopolitical leverage now outranks concerns about drug shortages or higher prices.
Trump didn’t name specific tariff rates. Still, the mere hint was enough to jolt the pharmaceutical sector into motion.
Just a day after the announcement, Swiss pharmaceutical giant Novartis said it would invest USD 23 billion over five years to beef up its US operations, pledging to manufacture all essential medicines for US patients within the country. Other players were less sanguine. Eli Lilly’s CEO told foreign media it would be “hard to come back from here.”
For Chinese drugmakers, the US has long been a critical export destination. In 2024, Chinese pharmaceutical exports to the US hit USD 19.047 billion—a 12% jump from the previous year, according to the China Chamber of Commerce for Import & Export of Medicines & Health Products (CCCMHPIE). That figure outpaced the combined value of exports to India, Japan, and Germany.
But that steady trajectory may now be in jeopardy. With tariffs looming, what will Chinese pharmaceutical firms do to recalibrate their global ambitions?
China still supplies the world’s drug ingredients
Liang Yu (a pseudonym) and his US-based co-founder haven’t talked about much else lately—tariffs have become the dominant topic. Years ago, they launched a company betting big on weight-loss drugs, leaning on Liang’s background in active pharmaceutical ingredients (APIs). Since then, they have secured orders across North America, Europe, and India.
APIs are now front and center in the tariff conversation. That’s because they account for the lion’s share of China’s pharmaceutical exports. In 2024, China exported USD 107.964 billion worth of pharmaceuticals, with Western medicine making up just over USD 53.953 billion. APIs alone contributed USD 43 billion, or 80% of that segment.
Liang Yu pointed out that the API supply chain is deeply entrenched. The US depends heavily on both India and China for these critical components—and that’s not something that can be quickly undone.
Roughly 90% of US biopharmaceutical companies import APIs to manufacture FDA-approved drugs. While India holds a larger slice of the API import market than China, about 70% of the key starting materials (KSMs) India uses come from China. The reasons are straightforward: cost efficiency, industrial capacity, and environmental factors.
Relocating API production to the US isn’t a viable option for most manufacturers. The costs are staggering. Building a new pharmaceutical facility in the US can cost upwards of USD 2 billion, according to Pharmaceutical Research and Manufacturers of America (PhRMA). “Even with a 100% tariff, it would still be cheaper to stay in China,” Liang Yu said.
Then there’s the timeline. From site design to FDA approval, launching a new plant could take at least five years—more commonly seven or eight.
For smaller companies, the risks are even higher. Liang Yu once considered moving another venture to the US but backed out. “If you’re small, one lawsuit or union dispute can bury you,” he said.
In short, reshoring the pharmaceutical supply chain, especially APIs, is a long game.
If tariffs kick in across the board, raw material costs will rise. Some of that burden could shift to US consumers and public health programs. One investor noted that many drug patents have recently expired, paving the way for cheaper biosimilars. But if production costs climb and prices don’t fall as expected, affordability could suffer.
Supply chains might also fray. A recent survey conducted by the Biotechnology Industry Organization found that 79% of companies with China-linked contracts would face significant disruptions under heightened tariffs.
And then there’s competition. If tariffs hit Chinese firms hard, those with large US exposure could take a hit. API giant Huahai Pharmaceutical acknowledged this in a public statement, saying it may need to streamline operations to stay profitable and is exploring US-based production options, albeit with strict requirements.
Some firms are leaning into process innovation, betting on efficiency to weather the policy storm.
Bracing for impact
The immediate worry may be APIs, but innovative drugs aren’t immune. Still, the industry’s response has been more measured.
That’s largely because most Chinese innovative drugs aren’t sold as finished products in the US. Instead, revenue often flows through licensing deals, where overseas partners handle development and commercialization. These royalty-based models aren’t currently affected by tariffs.
Even so, the risk of political headwinds looms. One executive from a biotech firm that recently licensed a product to a US partner said final negotiations involved a workaround: the deal was ultimately routed through the company’s US subsidiary due to pressure concerns.
Deals with hefty upfront payments—especially for first-in-class (FIC) or best-in-class (BIC) therapies—could attract closer scrutiny if the plan involves jointly building the US market.
Another red flag popped up earlier this month. On April 4, the National Institutes of Health (NIH) barred researchers from China and several other countries from accessing its data repositories. Multiple Chinese industry insiders described this as a serious setback for homegrown clinical development.
While full reshoring remains unlikely, some operations, like final formulation of innovative drugs, could shift. According to media outlet Fierce Pharma, citing PhRMA data, the number of US-based biopharmaceutical manufacturing plants has grown from 1,018 in 2018 to 1,591 today.
Contract development and manufacturing organizations (CDMOs), a key upstream segment in the drug supply chain, are also watching closely. While tariffs may not apply directly to them, there may be ripple effects.
A pharmaceutical investor focused on CDMOs described the business as capital- and labor-intensive, reliant on global optimization. “Where it makes sense, you build. That’s what globalization was for,” the investor said. While some CDMOs have begun building US facilities, these remain limited in scale, hampered by efficiency challenges and a shortage of skilled talent.
Jeff Stoll, KPMG’s strategy leader for life sciences in the US, told Fierce Pharma “it’s not that simple,” citing the unlikelihood of being able to fully relocate the manufacturing of drugs to the US or another territory with lower tariffs.
Some see opportunity in the upheaval. One industry insider noted that while the US is still the most profitable pharmaceutical market, demand for medicine spans every corner of the world. Tapping into new regions like Europe or Southeast Asia could inject fresh momentum.
Hybio Pharmaceutical, for one, said it has been weighing such moves for some time and is closely watching how the situation unfolds, aiming to lessen its reliance on the US.
Chinese firms, in fact, have weathered tariff shocks before. When the US hiked duties on Chinese syringes, respirators, and medical gloves in 2024, many companies responded by ramping up overseas production and steering toward more diversified markets.
“For now, we’ll wait and see. Tighten the belt, hold steady for two more years,” said Liang Yu. “By the next midterm elections, maybe things will be clearer.”
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Hu Xiangyun for 36Kr.